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Can Newmont (NEM) Hold A Premium As Gold Cools?

Simply Wall St · 4d ago

Newmont has been on a powerful three year run, yet with gold prices under pressure and large new projects on the table, the real question for investors is how well the current share price lines up with the cash the business can generate over time. The stock now trades at US$118.11, so the key issue is whether that market tag is fully supported by the miner's cash flow profile.

  • Newmont has returned about 260% over the past three years. This places significant emphasis on the idea that its future cash flows can justify a much higher valuation than in the past.
  • The planned Red Chris copper gold expansion, priced at up to US$4.8b, may support longer term production and cash inflows. It also concentrates a large amount of capital into a single project that needs to earn its keep.
  • If you'd rather focus on earnings, this one's for you. See why Newmont's 13.3x P/E tells a different valuation story.

The issue now is whether Newmont's current share price is adequately backed by the cash flows implied by its intrinsic value estimate using a Discounted Cash Flow (DCF) approach.

If you want a sense check on Newmont's cash flow story, it can help to compare it with other producers screened for similar metal exposure using 34 elite gold producer stocks.

Is Newmont Fairly Priced on Cash Flow?

The Discounted Cash Flow (DCF) model here looks at the cash Newmont can return to shareholders over time rather than just near term earnings. Over the last twelve months the miner generated about $9.19b of free cash flow, and the projections used in this 2 Stage Free Cash Flow to Equity model assume that figure settles into a growing but gradually moderating stream through the early 2030s.

Those cash flow estimates leave Newmont's intrinsic value coming out broadly in line with the current share price of US$118.11. This suggests the market is already assigning meaningful value to its existing mines and large projects like Red Chris. Because the Red Chris expansion is priced at up to $4.8b and gold prices have recently fallen to a one year low, that alignment between cash flows and market tag helps explain why the stock has not pushed further ahead despite strong recent free cash generation. Find out what Newmont could be worth using our Discounted Cash Flow (DCF) estimate.

The Newmont Narrative: What Would Justify Today's Price?

Narratives for Newmont pick up where the DCF leaves off and spell out the specific growth, margin and earnings paths that would need to play out for the shares to be worth materially more or less than today’s price, all housed on Simply Wall St’s Community page. Instead of a single output from one ratio or model, these scenarios set out the future that number rests on so you can watch over time whether Newmont’s reality stays close to that script.

Community views on Newmont are now split between a 14% undervalued upside story and a 24% overvalued concern around capital intensity.

Bull case: 14% undervalued

"Newmont's continued investment in ESG initiatives, such as decarbonization, water management, and tailings remediation, enhances its reputation and access to capital with institutional investors…"

Discover why this Narrative puts Newmont at 14% undervalued.

Bear case: 24% overvalued

"The forecast increase of about US$500 million in development capital in 2027 together with the Red Chris block cave estimate of US$4.2 billion to US$4.8 billion on a 100% basis raises the risk that capital intensity outpaces cash generation and compresses future free cash flow and returns on invested capital…"

Explore why this Narrative puts Newmont at 24% overvalued.

One more Newmont check that sits alongside the share price

Cash flows and projects are only part of the picture for Newmont, since the people setting priorities and the way they are rewarded can pull returns closer to or further from your interests. See who runs Newmont and how they are paid.